Energy Transfer agreed to buy Vaquero Midstream for $2.6 billion, funding the deal with nearly $2 billion in cash and 33.3 million new units. The master limited partnership expects the acquisition to immediately boost its distributable cash flow per unit and close in the fourth quarter.
Energy Transfer agreed to acquire Vaquero Midstream for $2.6 billion, paying nearly $2 billion in cash and issuing 33.3 million new units to fund the purchase. The pipeline company expects the deal to close in the fourth quarter.
What Energy Transfer is buying
Vaquero Midstream runs a 300-mile pipeline network in the Delaware Basin of Texas, serving oil and gas producers in one of the region's most active areas. It also operates the Caymus Processing Complex, which runs three natural gas-processing trains with combined capacity of about 675 MMcf/d. The site can support two additional trains, which would raise total processing capacity to 1.2 Bcf/d.
Long-term, fee-based contracts with an average remaining life of about 10 years back Vaquero's assets, which already interconnect with Energy Transfer's existing network in the area.
Immediate boost to cash flow
Energy Transfer expects the transaction to be immediately accretive to its distributable cash flow per unit, supporting its ability to sustain and grow a distribution that currently yields 6.5%. The MLP plans to grow that payout by 3% to 5% each year.
The deal also adds room to grow. Energy Transfer can expand the Caymus complex to handle rising customer volumes, and more throughput across its existing assets could open further downstream opportunities.
Part of a broader expansion push
The acquisition adds to an already large capital program. Energy Transfer expects to invest between $5.6 billion and $5.9 billion on expansion projects this year. Notable projects include the $2.7 billion Hugh Brinson pipeline, whose second phase is due in service in the first quarter of 2027. The company is also building the Desert Southwest pipeline expansion, which could cost up to $5.6 billion and is targeted for the fourth quarter of 2029. These projects aim to meet growing natural gas demand from AI data centers and LNG export terminals.
The Vaquero purchase follows Energy Transfer's long-running playbook of consolidating midstream assets through bolt-on deals that are immediately accretive. The transaction still needs regulatory approval before it can close.
Source: The Motley Fool
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